Opec’s landmark decision to reduce oil output from January has given industry some “much needed encouragement”, the chairman of Aberdeen-based Plexus Holdings said yesterday.
Jerome Thrall said at yesterday’s AGM that the agreement − which should result in combined output reductions of 1.8million barrels of oil a day, assuming non-Opec states contribute − marked a major shifted away from the rhetoric of recent years.
But Mr Thrall warned that the oil sector downturn had already lasted much longer than expected, and that its remaining duration was still a “big unknown”.
However, he did say a consensus was forming that the historically low levels of drilling activity which have dented the oil engineering service firm’s balance sheet would be reversed in 2017/18.
Plexus suffered pre-tax losses of £6.92million for the year to June 30, compared to a surplus of £5.94million the previous year.
Revenues dropped 61% to £11.23million due to a drop-off in orders for its wellhead technology.
Mr Thrall said yesterday that Plexus had done more than “just battening down the hatches and waiting for the cycle to turn”, however.
The company took “decisive action” to reduce overheads on staff and infrastructure by 20% in its last financial year to £11.28million and expects to further lower the figure in the coming 12 months.
Capital expenditure on assets was reduced to £1.96million from £7.02million a year earlier.
Plexus is also exploring ways of maximising licensing royalty opportunities by selling and promoting its patented engineering method, rather than just renting out equipment.
Mr Thrall said Plexus had made progress in expanding its client base beyond the North Sea, having completed a licence agreement with two independent Russian oil and gas equipment manufacturers, Gusar and Konar.
Plexus also won its first order through its Malaysian joint venture company and is in discussions with potential clients in the Middle East and India.
On the Opec deal, Mr Thrall said: “Although all cyclical upswings have their fair share of false dawns, and the current cycle is no exception the recent Opec meeting offered some much needed encouragement.
“Whether or not the production cut agreed by members is strictly adhered to, the major positive coming out from the group in recent months is, in our view, the noticeable change in tone and rhetoric compared to the previous two years.
“The recognition by Opec members of the need to restore balance to markets and the need for a higher oil price to drive investment is a major departure from recent times and is therefore welcome news for the oil and gas industry as a whole.”
The firm’s Pos-Grip wellhead technology – invented, developed and commercialised by Plexus founder and chief executive Ben van Bilderbeek − has been used on more than 400 wells worldwide.